Finding dividends in a low growth environment

Ben Lofthouse, Portfolio Manager of Henderson International Income Trust, discusses the dividend trends playing out in 2023, the benefits of diversification in an uncertain environment, and dividend sustainability during a period of low growth.

Ben Lofthouse, CFA

Head of Global Equity Income | Portfolio Manager

5 Apr 2023
25 minute listen

Key takeaways:

Despite a challenging backdrop, HINT has performed well with the net asset value currently at all-time highs. We have been increasing our exposure to European cyclical stocks and domestic Chinese companies which we believe will benefit from the economic reopening and recovery.
While the last few years have been challenging for investors, if you were not broadly diversified, the losses were much worse. The recent correction in tech stocks underscores how important diversification is for building long-term wealth.
The global economy is slowing as interest rates and corporate profits come under pressure. Though dividend cover remains strong, the pressure on corporate earnings means dividend growth will moderate to 5-7% in 2023.

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Important information

Please read the following important information regarding funds related to this article.

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions.

Specific risks

Higher yielding bonds are issued by companies that may have greater difficulty in repaying their financial obligations. High yield bonds are not traded as frequently as government bonds and therefore may be more difficult to trade in distressed markets.
The portfolio allows the manager to use options for efficient portfolio management. Options can be volatile and may result in a capital loss.
Global portfolios may include some exposure to Emerging Markets, which tend to be less stable than more established markets. These markets can be affected by local political and economic conditions as well as variances in the reliability of trading systems, buying and selling practices and financial reporting standards.
Where the Company invests in assets that are denominated in currencies other than the base currency, the currency exchange rate movements may cause the value of investments to fall as well as rise.
This Company is suitable to be used as one component of several within a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested in this Company.
Active management techniques that have worked well in normal market conditions could prove ineffective or negative for performance at other times.
The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result, losses (or gains) may be higher or lower than those of the Company's assets.
The Company may use gearing (borrowing to invest) as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incurred by the Company can be greater than those of a Company that does not use gearing.
If the Company seeks to minimise risks (such as exchange rate movements), the measures designed to do so may be ineffective, unavailable or negative for performance.
All or part of the Company's management fee is taken from its capital. While this allows more income to be paid, it may also restrict capital growth or even result in capital erosion over time.